A necessary first step
Every time we meet with a client and every time we take instructions from a client we must consider the issue of “legal capacity” of the client. Obviously, if the client does have capacity he or she is quite able to provide us with specific instructions. However, if there was ever to be a challenge as to the appropriateness of those instructions, one way of challenging what was done would be to contend that the client lacked legal capacity at that time.
What is “legal capacity”?
Legal capacity has been defined as “a person’s capability and power under law to engage in a particular undertaking or transaction”. For practical purposes it is synonymous with “mental capacity”. It is, however not a black or white issue but a shades of grey issue. For example, a person may have legal capacity to make decisions about their day to day care but not have capacity to make decisions regarding their investment assets. Ultimately it is a medical question to be answered.
Previously, we had a duty to satisfy ourselves that the client understood our advice and was capable of providing us with appropriate instructions. Now the changes in the law require us, for example, to certify:
- for Land Title Authority and Instruction forms that the client is of “sound mind”; and
- for Enduring Powers of Attorney that we “have no reason to suspect that the donor was or may have been mentally incapable at the time he/she signed the enduring power of attorney form”.
“Legal capacity” to make a Will
A recent decision of the High Court serves to emphasise the need for us to determine legal capacity before accepting instructions to undertake legal work and have legal documents signed. This case concerned the making of a new Will. Briefly, for the purposes of this article, the will-maker had signed the Will in 2005. In 2006 her health had deteriorated and by late 2006 she was permanently living at a retirement home. In April 2007 a son of the will-maker instructed a lawyer to prepare a new Will for his mother based on the 2005 Will. A draft Will was prepared and taken by that son to his mother for approval. The lawyer visited the will-maker at the retirement home. He noted that she was physically frail but appeared to understand what the changes in the Will were.
Medical evidence adduced at the Court hearing showed that as from late 2006 “her cognitive function indicated severe dementia”. “On a ‘good’ day she was less sleepy and would speak in short sentences. However these sentences frequently tended to be incoherent or unrelated to the question being asked. On a ‘bad’ day she failed to respond verbally at all or show any sign of recognition…”.
The Court found that the lawyer had not made any inquiries about the will-maker’s medical condition, her assets, her family relationships or other testamentary dispositions made by her. It further held that “he did not question the [will-maker] in order to test her testamentary capacity (for example asking questions about her time and space, orientation, her family, and the extent and nature of her estate). On the basis of brief, superficial verbal exchanges” with the will-maker, he had her sign the Will and he witnessed the same.
The Court concluded that the will-maker lacked testamentary capacity to sign the 2007 Will as although she appeared to understand what she was doing, the medical evidence was that she “was cognitively disabled to the extent that she was unable to make the judgments and assessments necessary for a valid testamentary disposition”. Accordingly, her 2005 Will was her last Will and Testament.
As can be noted, the issue of capacity can be crucial as far as prospective beneficiaries are concerned.
Our approach is to make an initial assessment of the client’s capacity. In the vast majority of cases there is no issue. However, for that minority of cases, we may well request a medical assessment before being prepared to advance matters further. It is a protection for the client and for those who may be affected by the legal documents signed.
- Retirement Villages
- Dying Without a Will
- Changes to Enduring Powers of Attorney
- Attorney used Enduring Power of Attorney
- The Risks of Having NO Will
- Trustees & Powers of Attorney